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Groupon evolving from  coupons to selling goods

Groupheadquarters building 600 W. Chicago Avenue Friday August 31 2012. l John H. White~Sun-Times

Groupon headquarters building, 600 W. Chicago Avenue, Friday, August 31, 2012. l John H. White~Sun-Times

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Updated: February 28, 2013 12:59AM



Daily deal site Groupon is enjoying a renaissance of good reviews from Wall Street analysts, even though its stock remains a smidgen of its initial public offering price.

What’s happening?

Groupon’s rivals appear to be in bad — perhaps even worse — shape, and Groupon has always had first-mover advantage.

Groupon also has the edge in offering deals overseas and appears to be smartly running its products — “Groupon Goods” — and mobile-deals-on-the-fly businesses, the analysts say.

The two positive reports remain in the minority, though, as three other analysts rate Groupon as a “sell,” and 18 rank it a “hold.”

The Chicago company’s stock rose 3.76 percent, to $5.80, on Thursday after one analyst noted Groupon’s improved international growth. Groupon’s stock price slipped 1.38 percent, or 8 cents, on Friday to close at $5.72.

PiperJaffray analyst Gene Munster’s upgrade of Groupon’s stock price to $8 from $5.50 followed an upgrade last week by analyst Arvind Bhatia of Sterne Agee.

Munster wrote to investors that Groupon’s international sales are on the upswing because its Groupon Goods business, which sells products rather than coupons, is popular in markets such as Britain and Poland.

“As Groupon promotes itself as more of a destination website, sales should become less dependent on ‘push’ emails,” Munster said in the investor note.

PiperJaffray’s survey showed 64 percent of Groupon’s customers plan to buy another Groupon in the next six months, and 11 percent said they wouldn’t — a rebound in the Groupon coupon’s popularity and the lowest dissatisfaction since PiperJaffray started the survey.

Bhatia wrote to investors that he believes Groupon’s strategy to evolve from “pushing” daily-deal emails to “pulling” customers to its website and offering geographically and demographically targeted e-commerce sales “will ultimately prove successful.”

He said that’s because fewer than 5 percent of Groupon’s revenue comes from search-engine marketing, yet 25 percent of Web searches and nearly 50 percent of mobile searches are for local commerce, giving Groupon plenty of room to exploit the market.

Jeffrey Houston, senior investment analyst at Barrington Research in Chicago, said he expects that Groupon finished the 2012 fiscal year with a 20 percent increase in active customers from a year earlier, to 40.4 million.

Houston also said he expects Groupon to benefit from its acquisitions of “several high-potential startups,” including location-based social app Glassmap, e-commerce company CommerceInterface and online reservations company VillageVines.

Yet question marks remain, Houston said.

“I am waiting for [Groupon] to accurately project its business revenue and profitability measures,” he said, referring to past missteps in reporting revenue.

He also wants to see Groupon’s international operations stabilize and improve. Houston said he believes Groupon is a “sustainable business,” quickly evolving from coupons to selling goods and changing its business model. Groupon’s stock has more than doubled in recent months from a 52-week low in November. Yet the company, troubled by concerns that its coupon offers can’t sustain it long-term, is trading at 29 percent of its November 2011 initial public offering price of $20.



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